veljan denison ltd share price Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Products that use liquid fluid power for their operations are referred to as hydraulic products and hydraulic liquid is pumped to cylinders and motors through the machine and is pressurized considering the resistance. The hydraulic equipment holds on to constant force irrespective of change in speed of the operation.

The global hydraulics market size is estimated to be USD 45.16 billion in 2023 and is projected to reach USD 54.71 billion by 2028 with a CAGR of 3.62%. Asia Pacific region held the largest share of the hydraulics market in 2022 because of the rapid urbanization and industrialization and hydraulic cylinders accounted for largest share of hydraulics market in 2022.

OUTLOOK:

The hydraulic industry is likely to align with the principles of Industry 4.0, emphasizing automation, connectivity, and data-driven decision-making. This could lead to the development of smart hydraulic systems that can be remotely monitored, controlled, and optimized.

As technology evolves, there may be a need for skilled professionals who understand both traditional hydraulic systems and modern technologies. Training and education in hydraulic engineering and related fields could become more relevant.

Economic fluctuations and industry-specific demands will continue to impact the hydraulic sector. Changes in demand, supply chain disruptions, and global economic conditions will influence the industrys growth trajectory

Hydraulic fluids play a significant role in system performance and environmental impact. Research and development efforts may lead to the emergence of alternative hydraulic fluids that are more environmentally friendly and have improved performance characteristics.

OPPORTUNITIES:

Hydraulic systems play a vital role in industrial automation and manufacturing processes. Opportunities exist for the development of advanced hydraulic systems that offer precision control, high-speed operation, and improved energy efficiency. These systems can enhance productivity and accuracy in tasks such as metal forming, material handling, and assembly line operations.

The construction and heavy machinery sectors rely heavily on hydraulic systems for tasks such as earthmoving, lifting, and excavating. Theres potential for designing innovative hydraulic solutions that offer greater power, efficiency, and safety for these applications. Additionally, technologies like hybrid hydraulic-electric systems can help reduce fuel consumption and emissions in heavy machinery.

Hydraulic systems are widely used in agricultural equipment like tractors, combines, and irrigation systems. Developing hydraulic components and systems that optimize crop production, reduce water usage, and enhance efficiency can create significant opportunities.

Hydraulic systems are used in oil and gas exploration for tasks like drilling and well control. Developing hydraulic products that can withstand harsh environments, extreme pressures, and temperatures can open doors in this sector.

RISKS AND CONCERNS:

Safety Hazards: The hydraulic industry often deals with high pressures, fast-moving components, and heavy machinery. Accidents involving hydraulic systems can result in severe injuries or fatalities if not properly managed. Hydraulic fluid leaks, explosions, and unexpected movements of hydraulic components can all pose significant safety risks.

Fluid Leakage and Environmental Impact: Hydraulic systems use fluids to transmit power. Leaks in hydraulic systems can lead to fluid contamination and spillage, which can have negative environmental consequences. Hydraulic fluids canbe harmful to the environment and water sources if not handled and disposed ofproperly.

Maintenance and Inspection: Hydraulic systems require regular maintenance and inspection to ensure they are functioning properly and safely. Neglecting maintenance can lead to equipment failures, unexpected downtime, and safety hazards.

Component Wear and Tear: Hydraulic components like pumps, valves, and hoses undergo wear and tear over time due to the high pressures and forces involved. This can lead to inefficiencies, reduced performance, and increased risk of system failure.

Energy Efficiency: Hydraulic systems have historically been criticized for their energy inefficiency, as hydraulic fluid leaks, internal friction, and pressure losses can reduce overall system efficiency. As environmental concerns and energy costs rise, there is a growing demand for more energy-efficient hydraulic solutions.

INTERNAL CONTROL SYSTEMSAND THEIRADEQUACY:

The Company has adequate Internal Control Procedures commensurate with the size of the Company.

FINANCIAL PERFORMANCE REVIEW:

The analysis of performance of the Company is given below:

• Sales Turnover:

The Comparative position of sales turnover achieved by the Company is as under:

		(Figures in Rs Lakhs)
Product	2022-23	2021-22
Revenue from Operations (Net)	11,064.40	9,785.33
Changes in inventories of Finished goods and Work-in-process	(281.91)	(249.27)
Total	11,346.32	10,034.60

• Key Performance Indicators

An analysis of the key indicators as percentage to revenue is given below:

S.No	Particulars	2022-23	2021-22
1.	Revenue from Operations (Net)	11346.32	10,034.60
	Cost of materials consumed	4412.16	3,619.74
2.	-% of revenue from operations	38.89%	36.07%
	Employee Benefit Expense	1003.49	827.48
3.	- % of revenue from operations	8.84%	8.25%
	Other Expenses	3594.97	3,020.10
	- % of revenue from operations	31.68%	30.10%
	Finance Costs	77.73	23.05
5.	- % of revenue from operations	0.69%	0.23%
	Depreciation Expense	485.15	469.95
6.	- % of revenue from operations	4.28%	4.68%
	Profit Before Tax	1976.49	2,320.92
/.	- % of revenue from operations	17.42%	23.13%
	Profit After Tax	1458.17	1,687.71
8.	- % of revenue from operations	12.85%	16.82%

HUMAN RESOURCES / INDUSTRIAL RELATIONS:

A cordial environment prevailed in the manufacturing unit and offices of the Company during the year. The Company has been continuously training its employees in the newer technologies. Industrial relations continued to be cordial. The number employees as on March 31,2023 stood at 293.

CAUTIONARY STATEMENT:

Cautionary Statement in this "Management Discussion & Analysis" may be considered being "forward looking statements" within the meaning of applicable securities law so regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.